Actual output Actual variable overhead Actual fixed overhead Actual machine time Standard cost and budget information for Wow Company follows: Standard variable overhead rate Standard quantity of machine hours Budgeted fixed overhead Budgeted output 4,500 units P360,000 P108,000 14,000 MH P6.00 per MH 3 hours per unit P777,600 per year 4,800 units per month
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
The following data are the actual results for AAA Company for the month of May:
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